Dominion Announces a 16 Percent Increase in 2002 Operating Earnings to $4.83 Per Share
2002 results include a 5 cent per share negative
timing impact from natural gas hedges; impact will effectively reverse in
2003
Company reaffirms 2003 operating earnings guidance
of $4.60 to $4.80 per share and 5 to 7 percent growth after 2003
Company announces further net capital investment reductions
Company launches consent to remove downgrade triggers on Dominion
Fiber Ventures notes and offers to purchase all outstanding notes
Conference call scheduled for 10 a.m. EST today to discuss 2002 financial
results and forward outlook
RICHMOND, Va. – Dominion (NYSE: D) announced today consolidated
operating earnings for the 12 months ended December 31, 2002, of $1.365 billion
($4.83 per share), compared with operating earnings of $1.053 billion ($4.17
per share) for the same period in 2001. This represents a 15.8 percent year-over-year
increase in earnings per share.
Operating earnings for 2002 exclude an after-tax charge of
$8 million (3 cents per share) related to a Dominion Capital asset impairment
partially offset by the effect of a $5 million after-tax adjustment (2 cents
per share) to restructuring liabilities accrued in 2001, reflecting a reduction
in the amounts originally expected to be incurred. These items combined to result
in a net after-tax charge of $3 million (1 cent per share).
Operating earnings for 2001 exclude special after-tax charges
of $97 million (38 cents per share) resulting from Dominion's estimated Enron
exposure; $136 million (54 cents per share) related to the buyout of power purchase
contracts and non-utility generating units previously serving the company under
long-term contracts; $25 million (10 cents per share) associated with the divestiture
of Saxon Capital Inc.; $68 million (27 cents per share) in restructuring charges
associated with a senior management restructuring initiative announced in November
of 2001 and other restructuring costs; and $183 million (73 cents per share)
from a write-down of Dominion Capital assets.
Reported net income for the 12 months ended December 31, 2002,
was $1.362 billion ($4.82 per share), compared with $544 million ($2.15 per
share) in 2001.
Thos. E. Capps, chairman, president and chief executive officer,
said:
"Our 2002 results were in line with the company's plans
as well as external guidance. Earnings were negatively impacted about 5 cents
per share by a mark-to-market loss on natural gas hedges related to expected
2003 production. The 2002 earnings impact of these hedges will effectively reverse
in 2003 as the hedges are settled and the related natural gas is produced and
sold. While operating earnings are expected to decline modestly in 2003 to a
previously announced range of $4.60 to $4.80 per share, Dominion is positioned
to grow earnings 5 to 7 percent annually after 2003 and continue paying the
company's $2.58 per share annual dividend."
In selected 2002 highlights Dominion:
Raised approximately $2 billion in equity and equity-linked
securities;
Added 2,015 megawatts of new generation through construction
and acquisition, bringing portfolio to about 24,000 megawatts;
Increased gas and oil reserves 24 percent to 6.1 trillion
cubic feet equivalent; and,
Added more than 46,000 net customers to the franchise customer base.
Capps said: "Dominion further strengthened its position
in the energy marketplace with key additions to its energy portfolio, including
the acquisitions of State Line power station and the Cove Point LNG facility,
and the successful integration of Louis Dreyfus Natural Gas, acquired in November
2001, into Dominion. Dominion's financial strength has continued to improve
over the past year, as we have strengthened the balance sheet, improved fixed-charge
coverage ratios and enhanced liquidity. We have moderated our growth plans somewhat
and are focusing intensely on improving free cash flow - or operating cash flow
minus net capital investments and dividends. But, we do so while continuing
to lay a solid foundation for future growth."
In response to difficult energy and financial market conditions,
Dominion has over the past year significantly reduced its future capital spending
plans. Today Dominion announced it has reduced its planned 2003 net capital
investments to about $2.5 billion and has reduced planned 2004 net capital investments
to about $2.2 billion. With these latest reductions, the company expects to
be between $100 million and $300 million free cash flow negative in 2003 and
between $300 million and $500 million free cash flow positive in 2004. In addition,
the company projects it will raise about $160 million per year in equity through
the dividend reinvestment and 401k plans, substantially covering its net financing
needs in 2003 and enhancing the company's expected positive cash flow position
in 2004.
Dominion will discuss details of its cash flow and capital
spending projections for 2003 and 2004 on today's earnings conference call.
Separately, Dominion announced today that it has launched
a tender and consent offering for the Dominion Fiber Ventures notes. Dominion
is seeking the consent of the note holders to remove the note downgrade triggers,
and is tendering to purchase all of the outstanding notes.
Capps said: "While management never considered the trigger
provisions to pose a liquidity concern, we have decided to take these steps
to eliminate the 'headline risk' associated with having debt triggers."
Full-year earnings breakdown by operating segment
Dominion Energy contributed $770 million ($2.72 per share)
to 2002 earnings compared to $723 million ($2.86 per share) in 2001. The change
in Dominion Energy's 2002 earnings resulted primarily from the effects of corporate
hedges on natural gas production, share dilution and other factors, which were
partially offset by customer growth, favorable weather in the electric franchise
area and lower taxes.
Dominion Delivery earned $455 million ($1.61 per share) in
2002 compared to $367 million ($1.45 per share) in 2001. The increase in Dominion
Delivery's earnings is primarily attributable to favorable temperatures, customer
growth, reduced expenses and lower taxes, partially offset by share dilution
and other factors.
Dominion Exploration & Production (E&P) contributed
$380 million ($1.34 per share) to 2002 earnings, up from $320 million ($1.27
per share) in 2001. The increase in Dominion E&P's earnings is primarily
attributable to higher production, which was offset by lower average realized
prices, increased expenses, share dilution and other factors.
The corporate segment, including Dominion Capital, posted
net expenses of $240 million (84 cents per share) for the year, compared to
net expenses of $357 million ($1.41 per share) in 2001. The decrease in the
corporate segment's net expenses is principally attributable to the elimination
of goodwill amortization, lower taxes and higher earnings at Dominion Capital.
Fourth-quarter earnings breakdown by operating segment
Consolidated operating earnings for the fourth quarter ended
December 31, 2002, were $342 million ($1.13 per share), compared to operating
earnings of $231 million (89 cents per share) in the fourth quarter of 2001.
Fourth-quarter 2002 earnings exclude an after-tax charge of $8 million (3 cents
per share) related to a Dominion Capital asset impairment which was partially
offset by a $5 million after-tax adjustment (2 cents per share) to restructuring
liabilities accrued in 2001, reflecting a reduction in the amounts originally
expected to be incurred. These items combined to result in a net after-tax charge
of $3 million (1 cent per share). Fourth-quarter 2001 earnings exclude special
after-tax charges of $97 million (37 cents per share) resulting from Dominion's
estimated Enron exposure; $68 million (27 cents per share) in restructuring
charges associated with a senior management restructuring initiative and other
restructuring costs; and $183 million (70 cents per share) from a write-down
of Dominion Capital assets.
Dominion Energy contributed $185 million (61 cents per share)
to fourth-quarter 2002 earnings compared to $127 million (49 cents per share)
in the fourth quarter of 2001. The increase in Dominion Energy's fourth-quarter
2002 earnings resulted from customer growth, cooler weather in the electric
franchise area, lower taxes and other factors, partially offset by the effect
of corporate hedges on natural gas production and share dilution.
Dominion Delivery earned $125 million (41 cents per share)
in its fourth quarter compared to $93 million (36 cents per share) for the same
period in 2001. The increase in Dominion Delivery's fourth-quarter earnings
is primarily attributable to lower than normal temperatures and customer growth,
which were partially offset by higher expenses, share dilution and other factors.
Dominion Exploration & Production (E&P) contributed
$109 million (36 cents per share) to fourth-quarter 2002 earnings, up from $86
million (33 cents per share) in the fourth quarter of 2001. The increase in
Dominion E&P's fourth-quarter earnings is primarily attributable to higher
production, which was offset by lower average realized prices, share dilution
and other factors.
The corporate segment, including Dominion Capital, posted
net expenses of $77 million (25 cents per share) for the quarter, compared to
net expenses of $75 million (29 cents per share) in the fourth quarter of 2001.
The change in the corporate segment's net expenses is attributable to reduced
earnings of Dominion Capital and other expenses partially offset by the elimination
of goodwill amortization and share dilution.
Conference call for investors / media
Dominion will host a conference call for investors today at
10 a.m. EST during which Dominion management will review 2002 results and the
going-forward outlook, including cash flow, capital spending and earnings guidance.
Members of the media are also invited to listen.
Domestic investors who wish to participate in the conference
call should dial 877-241-5946. International investors should call 706-643-0540.
Participants should dial in 5 to 10 minutes prior to the scheduled start time.
A live web cast of the conference call will be available on
the company's investor information page at www.dom.com/investors.
A tape recording of the conference call will be available
from approximately 1 p.m. EST January 23 through 11 p.m. EST January 30. Domestic
investors may access the recording by dialing 800-642-1687. International
callers should dial 706-645-9291 to access the recording. The conference
ID for the replay is 7551071. A replay of the conference call also will
be available on the company's investor information home page by the end of the
day January 23.
Dominion is one of the nation's largest producers of energy,
with a diversified and integrated energy portfolio consisting of 24,000 megawatts
of generation, 6.1 trillion cubic feet equivalent of natural gas reserves, 7,700
miles of natural gas transmission pipeline and more than 960 billion cubic feet
of storage capacity. Dominion also serves 3.9 million franchise natural gas
and electric customers in five states. In addition, Dominion owns a managing
equity interest in Dominion Fiber Ventures LLC, owner of Dominion Telecom. For
more information about Dominion, visit the company's web site at www.dom.com.
This release contains forward-looking statements including our expectations for 2003 earnings and for future annual growth rates that are subject to various risks and uncertainties. Discussion of factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations may include factors that are beyond the company's ability to control or estimate precisely, such as estimates of future market conditions, estimates of proved and unproved reserves and the behavior of other market participants. Other factors include, but are not limited to, weather conditions, economic conditions in the company's service area, fluctuations in energy-related commodity prices, changes to rating agency requirements, changing financial accounting standards, trading counterparty credit risks, risks related to energy trading and marketing, risks associated with successfully executing the telecommunications business plan and other uncertainties. Other risk factors are detailed from time to time in the company's Securities & Exchange Commission filings.
